Rubio Proposes Opening TSP to Private Sector Workers

In a speech at the National Press Club today, Senator Marco Rubio (R-FL) offered several retirement reform proposals, one of which was opening the Thrift Savings Plan up to private sector workers.

In a speech at the National Press Club today, Senator Marco Rubio (R-FL) offered several retirement reform proposals, one of which was opening the Thrift Savings Plan up to private sector workers.

The TSP is available to members of Congress, the military and federal workers. Rubio noted that it is one of the most efficient savings plans in America today, with low costs and high rates of return. His proposal would allow American workers who do not have access to an employer sponsored retirement savings plan to participate in the TSP. Under his proposal, matching funds would not be available to those who are not federal employees.

Rubio says that the changes necessary to accommodate the American people into the TSP would be primarily administrative. The same infrastructure would continue to be used. The change would be the size of the funds and the size of the support and administrative staff necessary to supervise it.

Rubio also proposed eliminating the Social Security payroll tax for older workers. “We should eliminate the 12.4% Social Security payroll tax for all individuals who have reached retirement age. These seniors have already paid their fair share, and we shouldn’t punish them for choosing to keep working rather than immediately cashing in. … And it could also make older workers more attractive to employers, since the employer’s half of workers’ payroll taxes would also be eliminated,” said Rubio.

Rubio said that doing this would incentivize workers to work longer which would lead to an increase in federal income tax revenue and give the workers more security by relying on their own incomes rather than federal assistance programs.

Other reforms proposed by Rubio include the following:

Eliminate the Social Security Retirement Earnings Test
Those who choose to claim their benefits early while they continue to work are subject to what’s called the Retirement Earnings Test. Under this test, benefits are reduced approximately 50 cents for every dollar a person between the ages of 62 to 65 earns in excess of $15,000 a year. Rubio cites one economist who estimates that abolishing this test would raise employment among early retirees by 5.3%.

Raise the Social Security Retirement Age for Younger Workers
Rubio notes that life expectancy has risen dramatically since the advent of Social Security which means there are more beneficiaries than ever in the program which puts Social Security on a path towards insolvency. According to Rubio, “The answer is to gradually increase the retirement age for future retirees to account for the rise in life expectancy. And if we act soon, we can do this without changing the retirement age for people who are currently over the age of 55.”

Reform the Calculation Method for Receiving Initial Social Security Benefits
Many low-income seniors rely exclusively on Social Security, but find themselves barely above the poverty line. They need higher benefits in order to have a secure retirement, yet raising benefits for all seniors would put too much strain on the Social Security trust fund. Rubio says the answer to this conundrum is to reduce the growth of benefits for these upper income seniors while making the program even stronger for lower income seniors and will add years to the program’s solvency.

Transition Medicare to a Premium Support System
Rubio said in his speech, “Medicare hospital insurance will go bankrupt in about 12 years and cease to exist. Again, this is not a scare tactic, it is simple math. In 2012, Medicare spending grew by 4.6 percent – to about $580 billion. And between now and 2022, this growth rate is expected to accelerate to around 7.4 percent per year. By 2026, the Medicare trust fund will run dry.”

To solve this, he proposes a premium support system to give seniors a “generous but fixed” sum of money to use to purchase health insurance from either Medicare or a private provider at their discretion. The government contribution would be fastened to either traditional Medicare or the average bid — whichever is cheapest. This way, if seniors choose plans that cost more than that benchmark, they would have to pay the difference. If they choose cheaper plans, they would get to keep the savings.

About the Author

Ian Smith is one of the co-founders of He has over 20 years of combined experience in media and government services, having worked at two government contracting firms and an online news and web development company prior to his current role at FedSmith.